Buying a Tow Truck Business? Ask These Questions First

Posted On: / By: Brian Knoderer
Buying A Business

In the United States, automobiles break down, get abandoned, and park in unauthorized spots daily. By 2023, it’s projected that the towing services industry will surpass over 7 million dollars in revenue. Although the impacts of COVID-19 have hit towing business owners hard recently, the industry is expected to bounce back over the next five years. As economic conditions start improving, you’ll most likely see more individuals out on the road, driving up the demand for towing companies. If you’re thinking about entering into this industry and buying a tow truck business, read on as we cover five essential questions you should consider.

5 Questions to Ask When Buying a Towing Business

Purchasing your own towing company, big or small, requires a decent amount of planning and inspecting. As you get started, be sure to ask and formulate the following five questions.

  1. Why is the Current Owner Selling?

    When first meeting with the tow truck’s owner, ensure you know exactly why they’re looking to sell. More often than not, business owners will sell a tow truck company because they’ve decided to retire or move. However, selling because of financial hardship does happen. If this is the case, it may be wise to keep your options open and move onto finding another tow truck business for sale. Recovering from a financial burden is often challenging for new business owners. Even with a solid business plan in place, it can take years to turn profits around.

  2. What does the Sale Include?

    car gets lifted onto tow truckLike many small businesses in the auto industry, startup costs can quickly accumulate. On average, new tow vehicles can cost anywhere from 58 thousand to 850 thousand dollars. Used tow trucks, on the other hand, can be significantly lower. You’ll also have other initial expenses to account for, such as a new insurance policy, licensing fees, and state permits. For these reasons, you should find out exactly what type of towing and company equipment is included in the sale, and plan accordingly.

  3. How Will You Set Your Towing Company Apart from the Competition?

    Much like auto repair shops, you’re always going to have other nearby tow truck operators to keep up with. Therefore, it’s in your best interest to make sure your company brings in new business and accommodates your clientele as much as possible. As a tow trucking company, you’ll have multiple target markets to tend to, including motor clubs, law enforcement officials, and individuals. Try brainstorming new ways you can attract more customers and grow and diversify your business, such as:

    • Adding roadside assistance services
    • Expanding your social media presence
    • Developing a customer referral program
  4. What are the Current Expenses?

    Next, you’ll need to review the current operating costs with the seller, so you can get a good idea of the day to day expenses you’ll be responsible for managing. These expenses may include anything from insurance fees to fuel costs incurred by tow truck drivers. Be sure to look over financial documents containing business bank account statements, tax returns, cash flow, and balance sheets.

  5. What is the Asking Price?

    Last but not least, find out the asking price. Once you know, it’s imperative to ask the owner how they came up with that number. If they’ve hired a professional, third-party service, you can rest assured that the price is most likely an accurate representation of the company’s real value. Unfortunately, this also means the seller will probably offer less room for negotiations.

Buying an existing business can be a fulfilling and rewarding experience. If you’re ready to own a successful towing company, contact the experts at Sunbelt Business Brokers. With decades of experience, our professionals can help you uncover the best opportunity for your budget and business goals. To get started, locate your nearest Sunbelt Office today.

Brian Knoderer is the President of Sunbelt Business Brokers. He has over 20 years of experience as a business owner and managing business transactions. As a seasoned intermediary, Brian has successfully represented companies in a broad range of industries helping business owners achieve their desired exit strategy or growth initiative.

Brian is also co-owner of Sunbelt Indiana and Managing Director of MMI Capital Partners, a franchisor focused investment banking firm.

Previously Brian was involved in several entrepreneurial ventures as well as having held corporate roles in Franchise Development for Prime Hospitality and Choice Hotels.

Brian is a graduate of Ball State University with a degree in Management Information Systems and earned his MBA from Butler University. He has received the Certified Merger & Acquisition Advisor (CM&AA) designation, holds both the Series 7 – General Security License and the Series 63 – Uniform Securities Licenses, and is a licensed Real Estate Broker. He has been affiliated with several organizations including the Entrepreneur Organization, a Member of the International Business Brokers Association, Venture Club, and a Board Member of The Entrepreneur Institute.

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